U.S. Securities and Exchange Commission
Washington, D.C.

Litigation Release No. 18164 / June 2, 2003

SEC Charges MedImmune Executive With Insider Trading

On June 2, 2003, the Commission filed an insider trading complaint in the United States District Court for the District of Maryland against Eric I. Tsao, an executive at MedImmune, Inc., a biotechnology company based in Gaithersburg, Maryland. The complaint alleges that Tsao engaged in three separate episodes of insider trading between September 1999 and December 2001, from which he realized aggregate illicit profits in excess of $150,000. The complaint further alleges that on each occasion, within days after learning that MedImmune was involved in confidential negotiations concerning a possible business combination with another public company - the first being U.S. BioScience, Inc., the second ImClone Systems, Inc., and the third Aviron - Tsao bought stock in the other company (and, in the case of ImClone, MedImmune stock as well). On each occasion, according to the complaint, Tsao bought the stock over the Internet in a securities account that, although nominally held by his parents in Taiwan, Tsao had opened, controlled, treated as his own, funded with his own assets, and used to pay his household expenses. The complaint also alleges that, after Tsao learned that NASD Regulation, Inc. ("NASDR") was investigating trading in one of the stocks at issue, he took steps to distance himself from this account, and later provided a false explanation of his trading to the SEC staff.

The Commission's allegations regarding the three episodes of insider trading, and Tsao's conduct after his trading came under scrutiny, are summarized below:

On September 16 and 17, 1999, Tsao bought 6,000 shares of U.S. BioScience after he had previously learned that MedImmune was at an advanced stage in confidential negotiations concerning a possible acquisition of U.S. BioScience. The acquisition was publicly announced on September 22, 1999, and Tsao sold the U.S. BioScience stock on September 30, 1999 for a profit of $18,000.

On December 4 and 14, 2000, Tsao bought 2000 shares of MedImmune stock and 2000 shares of ImClone stock, respectively, based on limit orders placed in late November. The purchases were made after Tsao had learned that the two companies were involved in negotiations to jointly manufacture ImClone's then leading cancer drug in development. Ultimately, the contemplated venture fell through, but ImClone eventually consummated a similar agreement with a major pharmaceutical company nearly a year later, which involved a partial tender offer from which Tsao realized profits of $50,475 upon the tender of some of the ImClone shares.

On November 23, 2001, Tsao bought 10,000 shares of Aviron after he had previously learned that MedImmune was in confidential negotiations concerning a possible acquisition of Aviron. The acquisition was publicly announced on December 3, 2001, and Tsao sold the Aviron stock on December 26, 2001 for a profit of $146,132.

After learning in February 2003 that NASDR was investigating trading in Aviron securities, Tsao called his online brokerage firm on several occasions to obtain information that would facilitate his creation of an innocent explanation for his Aviron trading. In one call, during which he claimed to be his father, Tsao also changed the password for Internet access to the account in question, which had previously consisted of characters reflecting his own personal information. He later changed the e-mail address on the account, which had previously been his own e-mail address at MedImmune.

When Tsao testified before the SEC staff on October 15, 2002, he falsely denied having placed or authorized any of the relevant trades in U.S. BioScience or Aviron, and provided a false alternative explanation for the trading.

Based on the facts alleged, the Commission's complaint charges Tsao with violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. It seeks a final judgment that would enjoin Tsao from violating these provisions in the future, order Tsao to disgorge his illicit trading profits with prejudgment interest, order Tsao to pay civil penalties, and prohibit Tsao from acting as an officer or director of any public company.